MetLife 2010 Annual Report Download - page 119

Recording of Assets Acquired and Liabilities Assumed
The following table summarizes the amounts recognized at fair value for each major class of assets acquired and liabilities assumed and
the resulting goodwill as of the Acquisition Date.
November 1, 2010
(In millions)
Assets acquired:
Totalinvestments........................................................ $101,036
Cashandcashequivalents.................................................. 4,175
Accruedinvestmentincome ................................................. 948
Premiums,reinsuranceandotherreceivables...................................... 1,971
VOBA ............................................................... 9,210
Otherassets........................................................... 1,146
Separateaccountassets................................................... 244
Totalassets .......................................................... $118,730
Liabilities assumed:
Futurepolicybenefits ..................................................... $ 31,811
Policyholderaccountbalances ............................................... 66,652
Otherpolicy-relatedbalances................................................ 7,306
Current and deferred income tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336
Otherliabilities.......................................................... 2,918
Separateaccountliabilities.................................................. 244
Totalliabilities......................................................... $109,267
Redeemable noncontrolling interests in partially owned consolidated subsidiaries
assumed ........................................................... $ 109
Noncontrollinginterests.................................................... (21)
Goodwill.............................................................. 6,959
Netassetsacquired ...................................................... $ 16,292
Goodwill
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic
benefits arising from other assets acquired and liabilities assumed that could not be individually identified. The goodwill recorded as part of
the Acquisition includes the expected synergies and other benefits that management believes will result from combining the operations of
ALICO with the operations of MetLife, including further diversification in geographic mix and product offerings and an increase in distribution
strength.
Of the $7.0 billion of goodwill, approximately $4.0 billion is estimated to be deductible for tax purposes. Of the $4.0 billion, approximately
$573 million is estimated to be deductible for U.S. tax purposes prior to the completion of the anticipated restructuring of American Life’s
foreign branches. See “—Branch Restructuring”. The goodwill resulting from the Acquisition was presented within the Company’s Inter-
national segment.
Identified Intangibles
VOBA reflects the estimated fair value of in-force contracts acquired and represents the portion of the purchase price that is allocated to
the value of future profits embedded in acquired insurance annuity and investment-type contracts in-force at the Acquisition Date.
The value of VODA and VOCRA, included in other assets, reflects the estimated fair value of ALICO’s distribution agreements and
customer relationships acquired at November 1, 2010 and will be amortized over the useful lives. Each year the Company will review VODA
and VOCRA to determine the recoverability of these balances.
The use of discount rates was necessary to establish the fair value of VOBA and the identifiable intangibles. In selecting the appropriate
discount rates, management considered its weighted average cost of capital, as well as the weighted average cost of capital required by
market participants. The fair value of acquired liabilities was determined using risk free rates adjusted for a nonperformance risk premium. The
nonperformance adjustment was determined by taking into consideration publicly available information relating to spreads in the secondary
market for the Holding Company’s debt, including related credit default swaps. These observable spreads were then adjusted to reflect the
priority of these liabilities, the claims paying ability of the insurance subsidiaries compared to the Holding Company and, as necessary, the
relative credit spreads of the liabilities’ currencies of denomination as compared to USD spreads.
F-30 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)